Wednesday, June 19, 2024

Zambia still remains at high risk of redefault in future-Moody’s


Rating agency Moody’s says it expects Zambia to remain subject to elevated risk of redefault in future.

In a ratings update, Moody’s affirmed the Government of Zambia’s Ca foreign-currency and local-currency long-term issuer ratings with a stable outlook.

The decision to affirm the Ca ratings balances Zambia’s limited external financing sources, very weak governance, exposure to environmental and social risks, and ongoing debt default against recent improvements to the economic outlook and efforts to improve fiscal management in the context of the IMF programme approved earlier this year.

Moody’s says the stable outlook implies that the government’s credit profile is unlikely to improve materially until after the current debt restructuring exercise is completed.

It also says the expected losses to creditors remain aligned with those associated with a Ca rating.

“The government is not currently servicing external private sector debt and, while it continues to meet local currency debt service obligations, risks remain elevated that some or all local currency instruments may be included in the upcoming restructuring exercise,” it states.

Zambia’s local-currency and foreign-currency country ceilings remain unchanged at Caa1 and Caa3, respectively.

The three-notch gap between the local-currency ceiling and the sovereign rating reflects the government’s small role in the economy relative to peers and moderate domestic and geopolitical risk, notwithstanding relatively high external imbalances and heavy reliance on a single common revenue source in copper.

The two-notch gap between the foreign-currency ceiling and the local-currency ceiling reflects Zambia’s high external indebtedness and very low policy effectiveness that generate a degree of transfer and convertibility risk, notwithstanding its open capital account and track record of limited intervention.

“After borrowing heavily from a range of external creditors to finance domestic infrastructure projects, the pandemic-induced shock led Zambia to default on its eurobonds in October 2020. Since then, Zambia has ceased servicing of its commercial external debt and is seeking a debt restructuring under the auspices of the G20 Common Framework for debt relief beyond the DSSI (Common Framework). Given Zambia’s unsustainable debt level and the size of the debt reduction outlined in the International Monetary Fund’s (IMF) Debt Sustainability Analysis, Moody’s expects bondholder losses will exceed 35% net present value at the time of the original default, consistent with a Ca rating.”

It adds,”To-date, Zambia has continued to service local currency debt obligations, including those to non-resident holders. Authorities are seeking to exclude all local currency debt instruments from the restructuring, citing concerns regarding domestic financial market stability and the need to preserve domestic debt market financing post-restructuring, as well as practical and legal considerations regarding the ability to isolate non-resident holders. However, the eventual parameters of Zambia’s debt restructuring will be subject to negotiations between Zambian authorities and its creditors.”

It says, “Risks that some local currency creditors will be included in the restructuring perimeter remain elevated, while Zambia’s weak governance, high exposure to environmental and social risks, and vulnerability to external shocks given its heavy reliance on a single commodity export base leave all creditors exposed to risk of redefault in the future following the restructuring.”

Moody’s expects more clarity on the details of the restructuring, including its overall size, interest reductions, maturity extensions, and treatment of local currency creditors to be outlined in a Memorandum of Understanding between the official creditor committee and Zambian authorities, which will serve as the basis for the next stage of the restructuring process: bilateral negotiations between Zambia and its individual creditors.


  1. These Jews they think everyone is like Kanye West. Governments are sovereign states. You can’t continue arm twisting them with your fake news and fear mongering media propaganda.

  2. This a fair assessment in my view, especially the weak governance viewpoint. There’s an appearance even among senior public sector managers such as accountants and procurement staff and especially opposition political parties that Zambia’s debt is HH’s problem and not theirs also. There’s no visible commitment to exploration of ways to save money. HH is standing alone stressing the mantra ” right quality, right price”.

  3. Hahaha ati we are now in the champions league. An economist president who claimed he had the magic trick to solve your problems is clearly considered a failure even by those whltes he so worships. Ati am the chief marketing officer for zambia. Haha..we the pf in uk are extremely shocked at how pathetic this govt is

  4. This is a more on point. The challenge that we have is that, we have left it to the UPND and HH alone, but forgetting that this is a national crisis that need all of us to work together to get out of this economic quagmire. Remember when things get tough, its the poor that will bare the brunt, those living above the poverty datum line barely feels the rough torrent. Either we stop playing politics and get down to business instead of blaming one another for the sluggish economic malaise we have created for ourselves by over borrowing and failing to invest in economic ventures that could have repaid most of these loans. These neo-political watchdogs are bent on creating illusions to scare investors with some of their blotted analysis to create an impression for themselves. Together we will…

  5. Yes indeed. The challenge we have is a national problem. If politicians are going to act like monkeys that invade a maize field and plunder it, run out and start looking at the Farmer’s next move, Then we are not politicians, but something else fit to be locked up.
    We must always remember to run our country diligently because the sovereignty we have is like a commodity.

  6. Was Zambia not assured that once the IMF deal is done, our external debt would be restructured or pardoned. Unless the done deal is a raw deal hence the eminent failure to relate well with our creditors.

  7. And to some Zambia “Bauleni” Economists here,Stop seeing things/Africa or Zambia through the eyes of the whiteman. I know the syllabuses you learn in Universities were all design by and for the white man. But be smart and stand on your own free will, and be objective in an African context, by an African. Chibamba Kanyama is one such British Monarch Economists who always see things through the London lenses. Yet he was born in Mazabuka – in the bush and still lives in Lusaka which is also in Zambia. Why not move to the UK then and be smart there?

  8. I have NEVER EVER heard these Moody people or even other rating agencies say anything good about Zambia or another African country. They are always negative about us. Maybe someone have heard these people speak positive on an African country? Someone pls? We have been qualified by the World Bank, the IMF and other Lenders including China and France as suitable for debt sustainability-who is this a kama Moody rubbish? We had debt , did they even come to our rescue ,we went to china and IMF on our own , so we will also rate ourselves thankyou. Our rating agency is coming to Zambia.

  9. Only IMF , World Bank and China etc can tell us whether we will default or not cos these are the people that lend us money to sustain ourselves from the debt. So iwe ka Moody shut up! the money we using is not from your father or mother. We didnt borrow this money from you., so who do you think you are to open your dirty mouth here? Go away! They were watching from afar all this time, now they see that we are back on a path to prosperity, they are resurfacing out of jealous with fake propagandas. Atase! where were when we were defaulting? Where were you when we needed money to rebuild our Debt?

  10. @Mulongoti Machayi
    Zambias debt will never be pardoned.
    The whole world knows that ECL and the PF borrowed recklessly and pocketed some of the money.

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